Thursday, November 5, 2015

Czech maintain rate, confirm FX policy

The central bank of the Czech Republic left its benchmark two-week repo rate steady at 0.05 percent and confirmed its commitment to using the exchange rate as an additional policy tool for easing monetary conditions.
The Czech National Bank (CNB) cut its rate to the current level in November 2012 and has been keeping the koruna at or below 27 to the euro since November 2013 through interventions.
In September the CNB's board discussed using negative interest rates and postponing the exit from the exchange rate policy due to the risks from the global economy, but ended up confirming that it would stick to its exchange rate target at least until mid-2016 and kept the rate steady.
Inflation in the Czech Republic rose slightly to 0.4 percent in September from 0.3 percent in August, well below its 2.0 percent target, while Gross Domestic Product grew by a larger-than-expected 1.1 percent in the second quarter from the first for annual growth of 4.6 percent, up form 4.0 percent.

The Czech National Bank issued the following statement:

"The CNB Bank Board decided at its meeting today to keep interest rates unchanged. The two-week repo rate was maintained at 0.05%, the discount rate at 0.05% and the Lombard rate at 0.25%.

The CNB Bank Board also decided to continue using the exchange rate as an additional instrument for easing the monetary conditions and confirmed the CNB’s commitment to intervene on the foreign exchange market if needed to weaken the koruna so that the exchange rate of the koruna against the euro is kept close to CZK 27/EUR.

This exchange rate commitment is one-sided. This means the CNB will not allow the koruna to appreciate to levels it would no longer be possible to interpret as “close to CZK 27/EUR”. The CNB prevents such appreciation by means of automatic and potentially unlimited interventions, i.e. by selling koruna and buying foreign currency. If the exchange rate departs from CZK 27/EUR on the weaker side, the CNB allows the koruna exchange rate to move according to supply and demand on the foreign exchange market."